AUTHOR’S GRADES (OTHER BUSINESS ASPECTS):
Allstate Insurance=B
State Farm=B-
Independent=A
FINAL ANALYSIS
ALLSTATE INSURANCE:
Pros:
· Very Profitable Businesses Model
· Relatively Easy to get in and out of the business
· Financing Readily available
· Corporate Support / Marketing
· Worst case liquidation value of agency is 1.5X qualified commissions back to Allstate
Cons:
· Exclusive Agreement with Single Carrier
· Some Restrictions on business management & product mix sold
INDEPENDENT:
Pros:
· Freedom to Manage Business Operations
· Very Easy to get in the business
· Can shop clients with various carrier relationships
Cons:
· Lack of Consistent / Quality Financing Available, which often results in true value not always transferred at the time of closing in the form of cash from buyer to seller
· Not as profitable to the agency owner as Allstate or State Farm
STATE FARM:
Pros:
· Relatively Profitable Business Model
· Corporate Support and Marketing
Cons:
· Hard to get into the business
· No Ability to Sell the business
· Little reward at the time you get out of the business
· Restrictions on business management & product mix sold
If I had to rank these three opportunities based on my guidelines listed above, here would be my list:
- Allstate Insurance
- Independent Agency Ownership
- State Farm
When looking at State Farm I really don’t see Agents as truly owning their businesses. Yes, State Farm Agents get paid as independent contractors, but they never have the ability to sell their business. In theory, they can never truly actualize the effort they put in to grow their business. Would you borrow money to spruce up a house you were renting? I do not understand why State Farm Agents take on debt to operate a business they truly rent and will never own. State Farm simply just doesn’t meet the sniff test when it comes to a true entrepreneurial opportunity.
“The views, opinions, positions or strategies expressed by the author and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of AgencyEquity.com.”
